Pepsico Pacific Trading Co Ltd v. Ardara Co Ltd

HCA000559A/1984

BETWEEN

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Coram: Hon. Power, J.

Dates of Hearing: 17 May 1984

Date of Delivery of Judgment: 31 May 1984

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JUDGMENT

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1. In this matter the Plaintiff, PepsiCo Pacific Trading Company Limited (P.P.T.) are suing the Defendant, Ardara Company Limited (Ardara) for $17,737,367.95 being the balance of the goods alleged to have been sold and delivered to Ardara by P.P.T. at Ardara's request, between May 1, 1983 and December 1, 1983.

2. P.P.T. sought summary judgment under 0.14 in the sum of $3,413,458.55 upon the basis that Ardara had no defence to that amount of the claim. The hearing of that application came before me and I was satisfied that Ardara had no arguable defence as regards the greater part of the amount as to which summary judgment was sought. I gave judgment in the amount of $3,329,135.75 to P.P.T.

3. Ardara now come before me asking that the judgment be stayed pending the determination of their appeal against it. There were a number of orders cited to me under which it was suggested the Court had power to allow such an application. I was, however, satisfied that the order under which the application properly fell was 0.59 r.13. This reads as follows :-

"13.- (1)    Except so far as the court below or the Court of Appeal may otherwise direct -

(2)    On an appeal from the High Court, interest for such time as execution has been delayed by the appeal shall be allowed unless the Court otherwise orders."

4. Mr. Stone, who appeared for the Respondent/Plaintiff, cited the first words of the note to this rule in support of his opposition to the grant of any stay. This note reads:-

"The Court does not 'make a practice of depriving a successful litigant of the fruits of his litigation, and locking up funds to which prima facie he is entitled,' pending an appeal".

The words quoted in the above passage come from the judgment of Bowen L.J. in The Arnot Lyle (1886) 11 P.D. 114, at 116. The full quotation is as follows:-

"There is no reason, in my opinion, why in admiralty cases we should make a practice of depriving a successful litigant of the fruits of his litigation, and locking up funds, to which prima facie he is entitled, for a long time because they are secured by the bail bond."

The underlining is mine. The full quotation makes it clear that one of the primary concerns of the learned Lord Justice was that the funds, to which the plaintiff was priria facie, should not be locked up "for a long time". I note this particularly as there is no question of a long delay in the present case as appeal dates are available in the second half of June.

The note goes on to say:-

"It is in the discretion of the Court to grant or refuse a stay and the Court will grant it where the special circumstances of the case so require."

5. The Attorney General v. Emerson (1889) 24 Q.B.D. 56 is required to as authority for that proposition. In that report Lord Esher, M.R. at 58, said, when dealing with the then 0.58 r.16, which was in almost identical terms to our 0.59 r.13, :

"The real question is, what is the construction of this rule? It says: "An appeal shall not operate as a stay of execution or of proceeding under the decision appealed from, except so far as the Court appealed from, or any judge thereof, or the Court of Appeal, may order; and no intermediate act or proceeding shall be invalidated, except so far as the Court appealed from may direct." In all the rules the word "may" has been held to mean ''may or may not." It has been held to give a discretion, which is called a judicial discretion, but is still a discretion. If the practice contended for be established, in my opinion it alters the effect of the rule. It takes away the discretion to refuse a stay of execution, by imposing a particular term as a condition of the refusal in all cases. The Courts have no power to alter the effect of the rule; no authority to establish any practice in conflict with the rule, and no power to say that it shall be binding upon the Courts. I decline to take any other view than that the Court has a discretion in each case."

Lindley L.J. said, at 59, :

"I must protest against the notion that any Court has a right to lay down a rule which shall limit. the discretion given by Order LVIII., r.16. The Court must decide upon the particular facts of each case. It is not competent for any Court or judge to lay down a rule which shall limit the exercise of that discretion."

6. There is, I am satisfied, a clear discretion which must, of course, be exercised judicially and will normally only be exercised where there are special circumstances.

7. I am satisfied that when determining whether or not special circumstances exist, it is proper for the Court to consider the following matters:

8. As regards the last consideration, I am satisfied that the Court is not called upon to go through the notice of appeal dealing with each of the grounds thereof as though it was sitting in appeal on its own judgment but must, in this regard, having made a broad assessment as to the appellant's prospect of success, give appropriate weight thereto.

9. I am satisfied, also, that it is proper for the Court to bear in mind that this appeal lies from an 0.14 application and that the judgment was, therefore, given without the issues having been ventilated and expanded upon by oral evidence as they world have been in the trial of the action.

10. The parent company of P.P.T. is PepsiCo Inc. (PepsiCo) which is a well-known American beverage company. P.P.T. was set up as a Hong Kong company so that it could represent the Popsicole Group in Hong Kong. The evidence showed that P.P.T. has a paid up capital of only 2 shares of $1 each, one of which is owned by a company called Disconer Limited and the other by a company called Beverages Foods and Services Industries Incorporated.

11. Mr. Richard Alvan Williams in an affidavit described himself as being currently employed as the senior in-house counsel of PepsiCo, Inc. "the Plaintiff's ultimate parent company".

12. Ardara and P.P.T. entered into a Distribution Agreement on the 17th August 1981 under which Ardara was to distribute the beverages of PepsiCo in Hong Kong. The period of this agreement was from June 1, 1981 until December 31, 1983. It appears, however, that, in June 1982, it was found that Ardara was losing money. After a series of negotiations PepsiCo and Ardara, on the 28th June 1983, entered into what was described as a Marketing Development Agreement and on the same date P.P.T. and Ardara entered into what was described as the Amendatory Agreement No.1.

13. Under the Marketing Development Agreement, PepsiCo agreed, inter alia, to pay Ardara a fixed subsidy in the sum of US$1,700,000 which was to be paid in two payments namely, US$1,230,000 upon the signing of the Agreement and US$470,000 on December 31, 1983. It was agreed in clause 5(c) that:-

"Notwithstanding anything to the contrary contained in sub-paragraphs (a) and (b) of this Section 5, both the Variable Subsidy and the Fixed Subsidy, to the extent not already paid, shall be payable by PepsiCo to Ardara immediately upon the cessation of Ardara's distributorship for PepsiCo softdrink products, if :-

(i)	such cessation takes places prior to December 31, 1983; and
(ii)	Ardara is not then in default under any other agreement, contract or written understanding between Ardara and PepsiCo, or between Ardara and any of PepsiCo's subsidiaries or affiliated companies.

14. The Amendatory Agreement No.1 provided that P.P.T. would take over the management of Ardara during the subsidy period which ran from the 1st May, 1983 to 31st December, 1983. It was provided that if Ardara's loss exceeded $3,379,000, P.P.T. would cause Ardara to receive a subsidy in the amount of such excess and that if Ardara made a profit or made a loss less than $3,379,000, P.P.T. would be entitled to that profit or to a sum equal to the difference between $3,379,000 and the loss. It is to be noted that the sum 3,379,000 is equivalent to US$470,000 which was the balance of the fixed subsidy to be paid by PepsiCo to Ardara.

15. The Agreement was terminated on the 30th November 1983, and Ardara maintains that it is entitled to the balance of the fixed subsidy from PepsiCo. It has, since the hearing of the 0.14 application, issued a writ against PEPSICO for recovery of that amount P.P.T maintains that it is entitled to the moneys owing under the Amendatory Agreement No.1 and brought the present action against Ardara to recover those moneys. Ardara says that the amount for which judgment has been given against it is slightly less than the amount owed to it by PEPSICO. Pepsico is, of course, not a party to the action before me and has not yet filed any defence in the action brought against it by Ardara. The only defence to that claim that is suggested in the material before me lies under Clause 5(c)(ii) of the Marketing Development Agreement. By virtue of that clause if Ardara is in default as regards a payment due to a subsidiary, which P.P.T. admittedly is, then PEPSICO is not liable to make any percent of the balance of the fixed subsidy. If then Ardara is in default under the Amendatory Agreement No.1, as I have held it to be, it would be open to PepsiCo to argue that it is not liable under the Marketing Development Agreement.

16. There were not only questions of law but there were also difficult questions of fact to be resolved in the hearing before me. They are fully canvassed in my judgment and I will not repeat them here. Suffice to say that to arrive at that decision it was necessary to thread through the interlocking agreements and the complex maze of facts to which they gave rise. In the particular circusmstarches of this case, much more so than in a normal appeal, it must be recognized, as a live possibility, that an appellate court might adopt an approach to the facts different from that which was adopted by me and might, in the outcome, arrive at quite different conclusions thereon.

17. I return to the 3 consideration which I set out above:

18. I am satisfied, having considered all of the matters set out above, that there are special circumstances and that there should be a stay. As I have indicated the Defendant has, since the hearing in front of me, taken out proceedings against PepsiCo under the Marketing Development Agreement seeking to recover the balance of the fixed subsidy. I am not prepared to order a stay pending determination of that litigation. I do, however, order a stay pending determination of the appeal. The Plaintiff argues that the stay should only be on terms as to payment of the amount of the claim into Court. I am not satisfied that it would be proper to impose any such term. I make an order nisi that costs of this application be costs in the appeal.

Representation:

Mr. William Stone & Mr. Faulkner (Baker & McKenzie) for Plaintiff.

Mr. Allan Brown (Johnson, Stokes & Master) for Defendant.